Exchange Traded Funds

Exchange traded funds (ETFs) are investment funds whose units are traded on the stock exchange, so they can be bought and sold easier than conventional investment funds. These funds are often linked to the value of a particular index (energy resources, technology, and other goods and raw materials, precious metals, etc.), so the fund unit price is changing according to the index variations.

Exchange traded funds generally are not actively managed. Their units are traded on the stock exchanges in real time as companies’ shares. Thus, the liquidity of these funds (the opportunity to quickly and without major losses convert them into cash) is usually high.

Benefits

You do not have to invest in separate financial instruments, to have the opportunity to combine investment with a selected market index.

Selling the exchange traded fund units is simpler than the existing package of financial instruments.

These passively managed fund units due to lower management fees can be purchased relatively cheaper.

Having selected the right exchange traded fund, you can make money not only from rising but also from dropping financial instruments’ prices.

Types of Funds

ETFs can just follow (replicate) a certain stock index (e.g., S&P500) or specific sector (e.g., pharmaceutical companies) stock index composition or asset class (e.g., bonds) prices. In addition to such exchange traded funds, there are more complex ones. For example:

Inversed Exchange Traded Funds: unit price of these funds varies in contrast to value of the financial instrument to which the fund is linked;

Leveraged Exchange Traded Funds: unit price of these funds increases several times more compared to the basic financial instrument;

Inversed Leveraged Exchange Traded Funds: the funds having both of the above-mentioned features.

Investment amount

Choose the amount of money to purchase of units of these funds according to your investment objectives and financial resources. In the case of choosing to invest in exchange traded funds, we recommend you to pay attention at the rates applied by Šiaulių bankas related to foreign exchanges.

Risk

As with other financial instruments, exchange traded funds unit prices can both rise and fall depending on the market situation. Because of these features of the fund management, unit return in the investment period may be affected by other factors that may cause other return than the tracked index.

Index tracking error risk: the risk when due to investment specifics fund units’ price not always accurately reproduces movement of the traced index price. Exchange traded funds unit price may change both more and less, compared with the comparative index. Typically, exchange traded funds best replicate the basic basket of price movements in the short term, so they are not suitable for long-term investment.

How do I start investing?

1. First of all, in any unit of Šiaulių bankas you have to sign a contract for the provision of investment services and open a securities account.

The information contained herein is only a presentational marketing message. It cannot be regarded as an offer to buy any financial instrument, to sell it and (or) to conclude the transaction (s).

Please note that investing involves certain risks, so before making an investment decision, you have to assess that, under certain circumstances, which are independent of Šiaulių bankas AB will and action, your investment value can drop. Šiaulių bankas AB is not responsible for your decisions taken on the basis of the information contained here.